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How do credit conditions shape economic recoveries?

Author

Listed:
  • Coricelli, Fabrizio
  • Roland, Isabelle
Abstract
This paper investigates the role of credit in shaping economic recoveries and tries to shed some light on the phenomenon of creditless recoveries using industry-level data for a large sample of countries. We find that while a failure of the credit stock to recover to its pre-crisis level does not hamper growth, a failure of credit flows to recover slows down economic recovery. Next, we find that industries that are more dependent on external finance recover more quickly in countries with better financial development during creditless recoveries as defined by Calvo et al. (2006a). This indicates that certain mechanisms enable the economy to grow despite the creditless character of recovery. These mechanisms may include the availability of alternative sources of financing such as trade credit, the re-allocation to less credit dependent sectors, or the take-up of unutilized capacity. Finally, we find evidence that industries that are more dependent on trade credit as opposed to bank credit recover more quickly because they are less vulnerable to prolonged credit market disruptions. This 'substitution effect' is stronger during creditless recoveries, giving support to the view that creditless recoveries are a response to protracted disruptions in official credit markets.

Suggested Citation

  • Coricelli, Fabrizio & Roland, Isabelle, 2011. "How do credit conditions shape economic recoveries?," CEPR Discussion Papers 8325, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:8325
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    Citations

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    Cited by:

    1. Fabrizio Coricelli & Marco Frigerio, 2015. "The Credit-Output Relationship During the Recovery from Recession," Open Economies Review, Springer, vol. 26(3), pages 551-579, July.
    2. International Monetary Fund, 2013. "Greece: Selected Issues," IMF Staff Country Reports 2013/155, International Monetary Fund.
    3. Martin Bijsterbosch & Tatjana Dahlhaus, 2015. "Key features and determinants of credit-less recoveries," Empirical Economics, Springer, vol. 49(4), pages 1245-1269, December.
    4. Bijsterbosch, Martin & Dahlhaus, Tatjana, 2011. "Determinants of credit-less recoveries," Working Paper Series 1358, European Central Bank.
    5. Sugawara, Naotaka & Zalduendo, Juan, 2013. "Credit-less recoveries : neither a rare nor an insurmountable challenge," Policy Research Working Paper Series 6459, The World Bank.
    6. Grjebine, Thomas & Szczerbowicz, Urszula & Tripier, Fabien, 2018. "Corporate debt structure and economic recoveries," European Economic Review, Elsevier, vol. 101(C), pages 77-100.
    7. Antonio FORTE, 2011. "Italy After The Crisis: A Case Of Recoveryless Credit Growth," Theoretical and Practical Research in the Economic Fields, ASERS Publishing, vol. 2(2), pages 132-140.
    8. De Andrés Mosquera, Andrés, 2017. "Los determinantes a largo plazo y su contribución a la tasa de ahorro de los hogares españoles en el período 1985-2016 || Long-term determinants and its contribution to Spanish household saving rate d," Revista de Métodos Cuantitativos para la Economía y la Empresa = Journal of Quantitative Methods for Economics and Business Administration, Universidad Pablo de Olavide, Department of Quantitative Methods for Economics and Business Administration, vol. 24(1), pages 292-339, Diciembre.
    9. Daniel DAIANU, 2015. "A Central Bank’S Dilemmas In Highly Uncertain Times - A Romanian View," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 159-180, March.

    More about this item

    Keywords

    Creditless recoveries; Financial crises; Trade credit;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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